GIC reports lower 20-year returns

By: Leong Sze Hian

GIC’s 20-year annualised real rate of return 4%

I refer to the article “GIC reports lower 20-year returns, warns of tough times” (Straits Times, Jul 28). It states: “GIC’s 20-year annualised real rate of return – its most important benchmark – was 4 per cent for the financial year ended March 31, down from the 4.9 per cent in the previous year. This means that GIC enhanced its portfolio by an average return of 4 per cent per year, over and above the global inflation rate between April 1996 and March this year.”

GIC’s 20-year annualised nominal rate of return 5.7%

According to GIC’s annual report – “In nominal USD terms, the portfolio generated an annualised return of 5.7% over the 20 years that ended 31 March 2016”.

20-year global inflation 1.7%?

So, does it mean that global inflation for the last 20 years was 1.7 per cent (5.7 – 4.0)?

CPF’s real rate of return?

Since “GIC’s 20-year annualised real rate of return – (is) its most important benchmark” – and CPF is managed by GIC – why not report the CPF interest rate in real terms too?

For example, since the CPF Ordinary Account interest rate has been at 2.5 per cent since 1999 – does it mean that the real rate of return is about 0.8 per cent (2.5 – 1.7)?

How does this compare with other national pension funds in the world?